 Imagine
you're a Mexican corn farmer in 1994. On a small plot of
rain-watered land, you grow corn for your family, with a bit
left over to sell so that you can buy medicine, clothes, and
other necessities. You may or may not be aware that your
government has just negotiated a trade deal, the North American
Free Trade Agreement, with the governments of the U.S. and
Canada. But if you don't know, you will soon—up close and
personal.
Hundreds of
miles north, impelled by market forces, U.S. farmers are using
petroleum- and pesticide-intensive farming methods that produce
large yields but pass on environmental costs to future
generations. Because of this, and also because they receive
massive government subsidies (most of which wind up going to
agribusiness), their corn sells for a much lower price than
yours. For decades, your government, like that of many
low-income countries, has protected its farmers with tariffs on
imported corn, which makes it easier for your corn to compete in
Mexico. Now NAFTA will end the tariffs that protect you, without
affecting the production model or subsidies that make U.S. corn
so cheap. To ease the impact, the Mexican government had
negotiated a 15-year transition period on corn tariffs—but
large-scale Mexican cattle growers, who want cheap feed and have
more political pull than you do, will talk the government into
getting rid of tariffs in a mere 30 months. The price you get
for your corn will plummet nearly 50 percent.
According to the
rosy predictions of NAFTA boosters, at this point you're
supposed to reallocate your land to something more profitable
than corn. But you and your neighbors in rural Oaxaca don't have
anywhere close to the credit, seeds, or connections you would
need to start growing a specialty crop such as arugula for the
U.S. So to make up for your lost income, you plant more corn,
further lowering the price. The plummet in corn prices doesn't
even help Mexican consumers; tortilla prices actually increase a
bit. Over the next decade, low prices force you off your land
(more than a million other Mexican farmers are likewise
affected).
By the end of
the 1990s, your brother has made the perilous desert crossing to
become an undocumented worker in the United States; you've found
a job at a "maquiladora" factory near the U.S. border. The
corporation that owns the factory has moved it from the United
States to Mexico, attracted by cheaper labor and the lack of
real unions—but is thinking about moving again to where wages
are lower still, playing countries against each other in a "race
to the bottom." Part of what enables companies to do this is
that in 1995 Mexico, the U.S., and more than 100 other countries
created and joined the World Trade Organization. The WTO, which
is both a forum for ongoing negotiation of trade agreements and
an enforcer of finished negotiations, applies anti-tariff
pressure worldwide.
Fast-forward to
January 2007: Increasing ethanol production in the U.S. causes
corn prices to rise sharply. Your cousin, who is still a farmer,
will benefit—at least until falling oil prices or increased U.S.
corn production causes corn prices to tank again, once more
transferring the risks of world markets to those least able to
bear them.
Despite the many
flaws in trade agreements like NAFTA and the WTO, more
agreements on the same model are being signed every year, many
of them between the U.S. and its most easily intimidated
allies—for example, the U.S.-Chile Free Trade Agreement in 2004,
the Central America Free Trade Agreement in 2005, and the
U.S.-Morocco FTA in 2006.
IT DOESN'T HAVE
to be like this. Many countries—from the U.K. and the U.S. in
the 1800s to East Asian countries in past few decades—have used
trade as part of highly successful, individually crafted
strategies for building wealth and lifting hundreds of millions
of people out of poverty. Well-considered trade can be a win-win
proposition for all countries involved, and societies do not
have to accept a corporation-driven economic model that sees
only this quarter's earnings and not the larger costs and
benefits to communities and the planet.
How do we get
there from here? For starters, we need to fix two closely
related things: the "market fundamentalist" ideology used to
justify current trade agreements, and the corrupt, bullying way
in which such agreements are negotiated and sold to
legislatures.
First, we need
an ideology reality check. It's certainly true that, all other
things being equal, increased exports can give your citizens
better jobs and increased imports can allow your citizens to buy
cheaper stuff. In a well-thought-out system, all countries
involved can come out winners, in part as each focuses on what
it can do most efficiently (what it has a "comparative
advantage" in).
So far, so good.
But market fundamentalism (aka "neoliberal economics") goes
berserk with these ideas, vociferously arguing that all barriers
to trade (including tariffs, quotas, and other laws, such as
health and environment standards) should come down, and stay
down. This philosophy has holes you could drive a truck through.
For one thing, it's not the way that virtually any
country got wealthy—all nations, from the U.K. to China, used
tariffs and other strategies to protect their growing
industries, and only cut trade barriers when their industries
had grown strong enough to compete. For example, Korea in the
1950s had a comparative advantage in growing rice, but its
government decided to use policies, such as import restrictions,
to branch out into higher-tech fields (a prescient decision, as
the prices of raw farm commodities, such as grains, have trended
down over the past four decades).
In contrast,
Latin America, which slashed trade barriers in the 1980s and
1990s in response to neoliberal pressure, saw per capita income,
which had grown 82 percent from 1960 to 1980, increase only an
anemic 9 percent from 1980 to 2000. As the title of an important
book on this topic by economist Ha-Joon Chang puts it, rich
countries urging poorer ones to cut all trade barriers are
arguably "kicking away the ladder" by which they themselves had
ascended.
In addition to a
weak grasp on history, market fundamentalists have a very narrow
understanding of theory. Nobel-winning economist Joseph Stiglitz
points out that neoliberal economic models, among other
failings, often assume full employment—i.e. that after a trade
agreement goes into effect, everyone whose job gets exported to
Mexico or China (or, in the case of peasant farmers, to a
GPS-guided tractor in the U.S.) will be able to get a different
job right away.
In the real
world, governments realize that too much unemployment is a
serious problem, so countries often push to expand markets for
their exports, and only reluctantly agree to open their own
markets to more imports. This is why, when the U.S. alleges that
another country's producers are selling catfish or steel below
the cost of production, the statement is often part of a threat
to file an international trade lawsuit, and never an expression
of gratitude for such great low prices.
WHICH BRINGS US
TO how our current dysfunctional trade agreements are created.
They don't occur on a "playing field" (certainly not a level
one), but at a negotiating table—where rich countries such as
the U.S. use their heft to get all they can for themselves. In
part, this is a literal negotiating table at which the U.S.
government's trade representative—who is appointed by the
president and has more than 200 staff people to research the
fiendishly complex question of what the U.S. wants—hashes out
agreements (hundreds of pages long) with other nations' trade
ministers.
Behind these
literal negotiations between nations, though, is a different,
but very real, competition—the ever-shifting balance of power
between corporations and other parts of society, such as
government, workers, and civil society. To put it bluntly, the
trade agreements we've got so far do a very good job of stacking
the decks in favor of large corporations and other wealthy
investors. The mechanics of this can be seen at international
trade negotiations, where congressionally sanctioned "Industry
Sector Advisory Committees," made up almost entirely of
corporate employees, get privileged information about—and input
to—the U.S. Trade Representative's playbook.
The trade
agreements that result from this process preferentially expose
working-class employees to foreign competition: Corporations can
hopscotch their factories from country to country, producing
that "race to the bottom" in wages and working conditions.
Companies that don't move their jobs overseas can still use the
threat of moving to pressure workers into accepting lower wages
and benefits or not joining unions. In contrast, higher-income
workers, such as lawyers, doctors, and economists, are largely
protected from foreign competition by immigration and licensing
laws. In one extreme case, a CEO who had moved thousands of jobs
to Mexico, General Electric's John Welch, made more money in
1997 than the combined paychecks of his 10,000 Mexican
employees, according to United for a Fair Economy.
As a result of
this stacked deck, as an increasing number of binding trade
agreements have been signed in recent decades, the rich are
getting richer, and the poor are getting poorer—both between and
within countries. Eighty percent of the world's population lives
in countries in which income inequality is on the rise. In the
U.S., the poorest 40 percent of households are making less than
they did in 1975 (taking inflation into account), while only the
top 20 percent of households saw their share of income rise.
Wealth inequality is even more skewed than income: Worldwide,
the richest 2 percent of individuals own more than everyone else
put together.
Trade agreements
also include a number of rules that tie the hands of governments
(which are often answerable to citizens) in exercising authority
over corporations (which are only answerable to stockholders). A
host of things that the average person might consider
important—job-creation strategies, policies that help protect
farmers' livelihoods, laws to protect clean air and water, and
more—are redefined, by trade agreements and the rhetoric of
their backers, as "market distortions" or "barriers to trade."
National governments are pressured or encouraged to give up
these policy options in trade negotiations. Agreements can cover
not just coconuts or toasters, but also "services" such as
water, electricity, insurance, and much, much more.
Why should we
care? Well, if you violate a trade agreement, another country
can file a trade lawsuit against you in, say, the WTO's or
NAFTA's closed-door trade tribunals. They can thus win the
ability to slap high tariffs on your exports—tariffs designed
not to protect their developing industries, but to punish your
economy. While the word "tariffs" might sound snoozeworthy,
actually it's anything but: It's what gives the WTO and other
trade agreements real teeth, in contrast to many other types of
international treaties. So when rational observers argue that
secret CIA prisons, which hide detainees from the Red Cross,
violate the Geneva Conventions, the international community
can't do all that much. But when the U.S.-based Ethyl
Corporation filed suit in a NAFTA tribunal because Canada had
banned the import of MMT, a gasoline additive and suspected
neurotoxin, Canada repealed the offending law, paid Ethyl
damages, and publicly stated that it had no evidence against MMT.
Such an
enforcement-by-lawyer system, of course, gives the advantage to
rich countries that can afford to hire expensive trade lawyers.
To make matters worse for poor countries, aid from donor
countries such as the U.S. and loans from institutions such as
the World Bank and International Monetary Fund have often come
with neoliberal strings attached—requirements to cut tariffs and
open markets, thus giving away what few trade bargaining chips
such countries had. One common example is the privatization of
water, electricity, or other services—few countries have yet
agreed in the WTO to sell off their electricity systems to
corporations, but the World Bank or IMF have forced a number of
countries, such as Nicaragua, to do this at fire-sale prices.
THE GOOD NEWS IS
that there are plenty of ways that citizens, especially in the
U.S., can act to demand a better world. As advocates in the U.K.
are starting to do, we can demand aid and trade agreements that
allow countries, poor and rich, to make their own decisions
about how to foster growth and equity. This doesn't mean leaving
poorer countries out of trade agreements; it means
letting them and a variety of thinkers and analysts who care
about justice into the conversation. For example,
Stiglitz suggests that a real anti-poverty trade agreement might
ask every country to open up its markets to each nation that is
both smaller and poorer than itself. Others can suggest
particular strategies that value local communities and the
environment. The ideas are out there—and more could flower if we
opened up the dialogue.
On a practical
level, we can and must demand more accountability from
government. The U.S. Trade Representative—the person in charge
of negotiating for the U.S.—is in the executive branch, so it's
worth writing to the president about trade deals in the works.
But the main place where government should exercise better
control over trade deals, and where your call or letter can make
a difference now, is Congress. (See "Taking Action," page 27,
for details.)
Back in Mexico,
a worker comes home from the maquiladora and prepares dinner for
her family. After her husband and children are in bed, she takes
the Bible off a shelf. In Ezekiel 27-28, she reads about how, in
the ancient world, the great trading city of Tyre made an idol
of its own power and wealth: "In the abundance of your trade,
you were filled with violence, and you sinned." All around the
world, in the churches and living rooms of richer and poorer
countries, we too can read these words. And, if we are willing
to listen instead of dictating, we can help to shape a world
that deals with trade in terms of justice, not just power.
Elizabeth
Palmberg is assistant editor of Sojourners.
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